The National Pension Commission (PenCom), via a public notice disseminated a Draft Framework for Micro Pension Plan (the Framework) for stakeholders’ consideration and comments.
The Framework seeks to extend pension coverage to employees of organizations with less than three employees and self-employed persons (Micro Pension Contributors) in accordance with the provisions of Section 2(3) of the Pension Reform Act 2014 (PRA).
Upon implementation, the Framework will ensure provision of retirement benefits to the Micro Pension Contributors (MPCs) through clearly spelt out guidelines on operational modalities for the Micro Pension Plan.
In addition to the operational modalities, the Framework also proposes strategies for securing participation in the Plan and minimum requirements for participation by licensed pension fund administrators and custodians.
Key highlights of the Framework include the following:
1. Participation shall be by registration and completion of the Retirement Savings Account (RSA) Opening form.
2. The minimum registration age is 18 years but persons from 15 years may participate subject to approval by the guardian.
In recognition of the peculiarities of the sector, MPCs are entitled to some incentives which include: access to a portion of their RSA balance – 25% of contributions made shall be available for contingent withdrawal before “retirement age”. The remaining 75% shall be managed exclusively for retirement benefits upon retirement – under extant rules. The withdrawal options are programmed withdrawal and life annuity.
Licensed Pension Fund Administrators and Custodians are the only participants allowed and they are obliged to render periodic returns on the operations of the Plan. Before the Framework is finalised, stakeholders are advised to send inputs and review comments to firstname.lastname@example.org, to enable PenCom proceed with the next phase of the implementation. A copy of the Framework may be found here.
It is expected that once the Framework is finalised and rolled out for full implementation, there would be increased voluntary participation in the Contributory Pension Scheme by the informal sector. We therefore enjoin stakeholders to review the draft framework and provide feedback where necessary.